Full Year 2014 Results
26 February 2015
© AB InBev 2015 – All rights reserved
1
Forward looking statements
Certain statements contained in this report that are not statements of historical fact constitute forward-looking statements, notwithstanding that
such statements are not specifically identified. In addition, certain statements may be contained in the future filings of the Company with the
competent securities regulators or other authorities, in press releases, and in oral and written statements made by or with the approval of the
Company that are not statements of historical fact and constitute forward-looking statements.
Forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve
known and unknown risks, uncertainties and other factors, many of which are outside the Company’s control and are difficult to predict, that may
cause actual results or developments to differ materially from any future results or developments expressed or implied by the forward-looking
statements. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include, among
others: (i) local, regional, national and international economic conditions; (ii) limitations on the Company’s ability to contain costs and expenses;
(iii) the Company’s expectations with respect to expansion, premium growth, accretion to reported earnings, working capital improvements and
investment income or cash flow projections; (iv) the Company’s ability to continue to introduce competitive new products and services on a timely,
cost-effective basis; (v) the effects of competition and consolidation in the markets in which the Company operates; (vi) changes in consumer
spending; (vii) changes in applicable laws, regulations and taxes in jurisdictions in which the Company operates; (viii) changes in pricing
environments; (ix) volatility in the prices of raw materials, commodities and energy; (x) difficulties in maintaining relationships with employees; (xi)
the monetary and interest rate policies of central banks; (xii) continued availability of financing and the Company’s ability to achieve its targeted
coverage and debt levels and terms; (xiii) financial risks, such as interest rate risk, foreign exchange rate risk, commodity risk, asset price risk,
equity market risk, counterparty risk, sovereign risk, liquidity risk, inflation or deflation; (xiv) regional or general changes in asset valuations; (xv)
greater than expected costs (including taxes) and expenses; (xvi) the risk of unexpected consequences resulting from acquisitions; (xvii) tax
consequences of restructuring and the Company’s ability to optimize its tax rate; (xviii) the outcome of pending and future litigation and
governmental proceedings; (xix) changes in government policies; (xx) natural and other disasters; (xxi) any inability to economically hedge certain
risks; (xxii) inadequate impairment provisions and loss reserves; (xxiii) technological changes; (xxiv) continued geopolitical instability; and (xxv) the
Company’s success in managing the risks involved in the foregoing. All subsequent written and oral forward-looking statements concerning the
proposed transaction or other matters and attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by
the cautionary statements referenced above. Forward-looking statements speak only as of the date on which such statements are made.
Certain of the synergies information related to the combination with (or acquisition of shares of) Grupo Modelo discussed herein constitute forwardlooking statements and may not be representative of the actual synergies that will result from the combination with (or acquisition of shares of)
Grupo Modelo because they are based on estimates and assumptions that are inherently subject to significant uncertainties which are difficult to
predict, and accordingly, there can be no assurance that these synergies will be realized.
The Company’s statements regarding financial risks are subject to uncertainty. For example, certain market and financial risk disclosures are
dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the
market or financial risk disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have
been estimated. Subject to the Company’s obligations under Belgian and U.S. law in relation to disclosure and ongoing information, the Company
undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or
otherwise.
This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any offer, solicitation or sale
of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities
laws of such jurisdiction. By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound
by the above limitations.
© AB InBev 2015 – All rights reserved
2
FY14 Highlights
• Solid financial performance
• Strong commercial results in most of our top markets
• Continuing growth of Focus and Global Brands
• Very strong revenue and revenue per hectoliter growth
• Volume and brand equity benefits from 2014 FIFA World Cup
• Good EBITDA growth and margin improvement driven by top line
despite step up in investments behind our brands
© AB InBev 2015 – All rights reserved
3
FY14 Financial Summary
• Total volumes +0.6%
• Own beer +0.5% and non-beer +1.3%
• Focus Brands +2.2% and Global Brands +5.4%
• Total Revenue +5.9%
• Revenue per hl +5.7% on a constant geographic basis
• EBITDA +6.6%
• EBITDA margin +25 bps to 39.4%
• Normalized EPS of $5.43, up 10.6%, versus $4.91 in FY13
• Proposed Final Dividend of €2.00 per share, bringing FY14 total
to €3.00
• $1 billion share buyback program
© AB InBev 2015 – All rights reserved
4
Focused on brands with the greatest
growth potential
Our Focus Brands accounted for approx. two-thirds of our volume and revenue in 2014
Focus Brands Volumes as a % of FY14 Volume
All Other
Brands,
31.9%
Global
Brands,
18.8%
Other Focus
Brands,
49.3%
Total Focus
Brands = 68.1% of volumes
Note: Global Brands include Budweiser, Corona (ex-US), Stella Artois.
Focus Brands and Global Brands Volumes and Revenues exclude licensing agreements.
© AB InBev 2015 – All rights reserved
Focus Brands Revenues as a % of FY14 Revenue
All Other
Brands,
36.1%
Global
Brands,
20.0%
Other Focus
Brands,
43.9%
Total Focus
Brands = 63.9% of revenues
Global Brand Volumes +5.4%
Budweiser
+5.9%
Corona
+5.8%
Stella Artois
+2.5%
Good performances in Brazil,
China, Canada & UK
Driven by growth
in Mexico and major export
markets
Good growth in Brazil,
Canada, and US. Launched
in Mexico
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6
Innovations accounted for approximately
8% of revenues in FY14
New Ritas Flavors –
US
25 oz can –
US
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Johnny Appleseed
Cider – US
Cubanisto –
UK and France
Skol Beats Senses –
Brazil
550 ml can –
Brazil
MixxTail Mojito –
Argentina
16 oz re-closeable
aluminum bottle – US
7
US – FY14 summary
0.5 %
Industry
• STRs -0.6% in FY14. STRs flat in
4Q14, driven by improving macro
& lower oil prices
AB InBev
US Industry Growth - Rolling 12M Trend
0.0
-0.5
-1.0
-1.5
Jan-15
Dec-14
Oct-14
Nov-14
Sep-14
Jul-14
Aug-14
Jun-14
Apr-14
May-14
Mar-14
Jan-14
Feb-14
Dec-13
Oct-13
Nov-13
Sep-13
Jul-13
Aug-13
Jun-13
Apr-13
May-13
Mar-13
Jan-13
• Shipments (STWs) -1.5% in FY14 and
flat in 4Q14
-2.0 %
Feb-13
• STRs -1.7% in FY14 & -1.4% in 4Q14
Source: Internal estimates based on STRs.
• Market share decline of 50 bps
• Beer revenue per hectoliter +1.7% in FY14 and +2.1% in 4Q14
• EBITDA -1.4% with margin contraction of 72 bps, due to higher
brand investments
© AB InBev 2015 – All rights reserved
Note: Share figures based on internal estimates (STRs)
8
Bud Light ended year with good momentum
• The most important brand in our portfolio
& our #1 focus
• Bud Light is gaining share of premium lights.
Bud Light total share down 20 bps in FY14
• “Up for Whatever” campaign was very
successful and new packaging has
delivered results
• Ritas are performing well, with 10 bps of
share gain in FY14 – and Lemon-Ade-Rita
to come in FY15
• MixxTail joining the Bud Light family in 2015
© AB InBev 2015 – All rights reserved
Note: Share figures based on internal estimates (STRs)
9
Budweiser - reinforcing quality credentials
• Budweiser share down in FY14 with
momentum picking up in the fourth quarter
• Aluminum bottle boosted the brand in 4Q14,
holiday campaign resonated at retail
• Exciting upcoming activations include food
pairings, music platform, holiday, and quality
messaging
© AB InBev 2015 – All rights reserved
Note: Share based on internal estimates (STRs)
10
Above premium
• Michelob Ultra and High End
share grew 40 bps in 4Q14
and FY14
• Montejo rollout going well
• High End business unit in
place and pursuing a portfolio
approach – including M&A in
Craft
© AB InBev 2015 – All rights reserved
Note: Share based on internal estimates (STRs)
11
Recent additions to our craft portfolio
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12
Mexico – FY14 summary
Industry
• Industry growth of +2.6% in FY14, driven by stronger economy
AB InBev
• Volume: +1.6% with strong contribution from Focus Brands particularly
Corona, Bud Light and Victoria
• Some share loss due to regional mix
• Revenue per hectoliter growth of 3.7%
• EBITDA growth of +21%
• EBITDA margin expansion of over 600 basis points to 47.3%
© AB InBev 2015 – All rights reserved
Note: Share based on internal estimates
13
Focus Brand volumes +5.6% in FY14
Corona +6.5%, Bud Light almost doubling and Victoria approx. +10%
Bud Light 2015 Super Bowl Campaign
Corona 2014 FIFA World Cup Campaign
Bud Light “Since Today” Campaign
Victoria New Can
© AB InBev 2015 – All rights reserved
Bud Light Ritas Launch Campaign
14
Modelorama renovation…
Coronization is underway
Significant
From this…
passing through
Modelorama
as a result of
renovations
to this…
Outside
© AB InBev 2015 – All rights reserved
increase
in volumes
Inside
15
Grupo Modelo cost synergies being
delivered ahead of schedule
1,000
USD millions
800
270
1 billion
USD
To Go
Total
Over-delivered on
+USD 500M of working
capital savings
270
730
FY14
Cumulative
600
385
400
200
75
0
Pre Close
© AB InBev 2015 – All rights reserved
FY13
16
Brazil – FY14 summary
Industry
• Beer industry volumes +4.3% boosted by the World Cup
AB InBev
• Beer volumes +4.7%, non-beer volumes +1.4%
• Beer market share increased 30 bps to 68.2% and up 50 bps in the
quarter to 68.0%
• Beer revenue per hectoliter growth +6.2% in FY14
• EBITDA growth of 5.7%
• Margin contraction of 246 bps to 52.4% driven by strong top line
performance, offset by sales & marketing investments
© AB InBev 2015 – All rights reserved
Note: Share based on internal estimates
17
Committed to leadership in Premium
From core plus to specialties
Premium Beer Weight
Brazil Industry
4.9%
2010
4.9%
2011
Source: Industry estimates
5.6%
2012
Premium Beer Weight
in other Markets
7.5%
6.3%
2013
30.3%
18.4%
21.8%
23.5%
2014
Source: Euromonitor (2013)
Strong increase in premium volumes since 2011
with significant room for growth
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18
Brazil – Confidence in the future
• Favorable Demographics
– growth in legal drinking
age (LDA) population for
next 10 years
Beer per capita consumption (PCC)
vs. personal income (2013)
PCC in Liters
140
Brazil Average
120
• Income disparity leads to
per capita consumption
and regional growth
opportunities
Brazilian States
100
80
• Premiumization of the
beer category
60
Around 35%
of the Brazilian population
below the national average
on both metrics
40
20
500
1000
Source: Internal data
© AB InBev 2015 – All rights reserved
1500
2000
2500
$R Monthly
19
China – FY14 summary
FY14
Industry
1.6%
• Beer industry volumes down approx.
4% in FY14 and down approx. 10%
in 4Q14
4Q14
1.2%
Approx. -4%
AB InBev
Approx. -10%
• Beer volume +1.6%
• Strong growth of Focus Brands +7.8%,
especially Budweiser and Harbin
ABI Volumes
Industry Volumes
Source: Internal estimates
• Organic market share growth of approximately 90 bps to 15.9% in FY14,
or 16.8% including acquisitions
• Revenue per hectoliter +9.9% driven mainly by brand mix and consumer
trade up to core plus and premium brands
• EBITDA growth of +29.0%, to over 700 million USD, with
margin up more than 250 bps to 18.5%
© AB InBev 2015 – All rights reserved
Note: Share figures based on internal estimates
20
China Focus Brands +7.8% in FY14
• Budweiser grew double digits in FY14
• Budweiser Supreme and aluminum bottle
added to the portfolio
• Chinese New Year celebrations
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• Harbin opened the largest and most interactive
beer museum in China
• Successful NBA activations in 4Q14
• Harbin continues to amplify the NBA property
21
Organic EBITDA increase of almost $1.2 bn (+6.6%) in FY14
USD millions
AB InBev margin
expansion of 25bps
to 39.4% in FY14
8,000
7,000
6,820
5,742
6,000
5,000
4,000
3,000
2,186
2,000
1,352
1,343
1,067
1,000
0
EBITDA
Margin
Margin
Expansion
(bps)
North America
Latin America North
Mexico
Latin America South
Europe
Asia Pacific
42.4%
51.0%
47.3%
45.6%
27.6%
21.2%
(60)
(216)
608
(30)
39
244
Note: Excludes Global Export and Holding Companies (GEHC), for simplicity
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22
Highlights from other top countries – FY14
• In Argentina, beer volumes were down 1.7%, with some market share loss.
Successful launch of MixxTail Mojito
• Own beer volumes in Belgium were essentially flat, benefitting from a strong FIFA
World Cup activation. Market share stable
• In Canada, our beer volumes were down 0.7%. We grew market share, led by
Budweiser, Bud Light, Corona and Stella Artois
• In Germany, own beer volumes declined by 3.4% in a very competitive market.
Beck’s and Franziskaner held share
• South Korea, beer volumes were down 6.4% in 4Q14 due to a weak industry, and
some share loss. New campaigns have been implemented for both Cass and OB
• The United Kingdom had a very strong year, despite industry volume decline.
Volumes of own products were +1.5% led by Budweiser, and market share gains in
the off-premise
© AB InBev 2015 – All rights reserved
Note: Share figures based on internal estimates
23
Normalized EPS increased to $5.43 in FY14, driven by
organic EBIT growth and lower Net Finance Costs
+0.33
+0.34
5.43
USD per share
(0.40)
(0.09)
+0.34
4.91
2013
as reported
Grupo Modelo
Consolidation
impact (1)
EBIT
organic
growth (2)
Net finance costs
Taxes &
others
FX/Scope
(excl.
Modelo)
2014
as reported
1) Incudes five months of EBIT (January to May 2014) for Grupo Modelo, less five months of Share of Results of Associates relating to
Grupo Modelo (January to May 2013).
2) Includes seven months of EBIT organic growth of Grupo Modelo (June to December 2014).
© AB InBev 2015 – All rights reserved
24
FY14 Net Finance Costs decreased to 1.8bn USD
Net interest on
net defined
benefit liabilities
Accretion
expenses
Hedge of share
based payment
programs
Currency and
Bank fees,
other hedging transaction taxes,
result
other
2014
USD millions
2013
Interest
expense
+374
+255
+85
-84
-1,828
+32
-2,486
-4
Decrease in FY14 Net Finance Costs mainly due to:
• Lower interest expense
• Positive impact of the mark-to-market adjustments linked to the hedging of our
share-based payment programs
• Positive currency gains and other hedging costs
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25
Normalized Effective Tax Rate (ETR)
2015
guidance range of
22-24%
2016-2018
guidance range of
22-25%
18.8%
16.6%
2013
2014
2015
2016-2018
Increase in normalized ETR in FY14 mainly due to:
• Changes in country mix, including the impact resulting from the combinations with Grupo Modelo and
Oriental Brewery
Guidance for FY15 reflects an increase versus FY14 mainly due to:
• Lower deductibility of goodwill amortization going forward, country mix and the
assumption of zero future gains or losses on the hedging of our share-based
payment programs
© AB InBev 2015 – All rights reserved
26
Continued improvement in Core Working Capital
Core Working Capital (CWC) as a
% of Net Revenues (1)
4.0%
2.1%
CWC/ Net Revenues (12 months)
2.0%
0.0%
-0.6%
-2.0%
-4.0%
-5.4%
-6.0%
-7.4%
-8.0%
-8.5%
-10.0%
-10.0%
-11.0%
-12.0%
2008
2009
2010
2011
2012
2013
2014
1) Yearly average (on a rolling 12 month basis). CWC includes elements considered "core” to the operations,. For example core receivables would
include items such as trade receivables, other receivables (i.e. marketing prepayments), cash guarantees, loans to customers, non-income tax
receivables, packaging deposits, and excludes derivatives, payroll-related receivables, deferred consideration on sales of assets, dividend receivables,
interest receivables. Core payables includes items such as trade and other payables, non-income tax payables, packaging deposits, and cash
guarantees but excludes derivatives, payroll-related payables, deferred consideration on acquisition, dividend payables, interest payable. There is no
change to the calculation of Inventories, we include the same amounts for CWC as for Working Capital (as defined in our Financial Statements).
2) 2008 NA includes only 6 weeks of the legacy AB business. Results prior to 2013 exclude Grupo Modelo.
© AB InBev 2015 – All rights reserved
27
Robust Cash Flow generation
16.0
Free Cash Flow
13.3
12.5
12.0
12.1
12.2
12.2
11.5
10.6
10.5
USD millions
14.1
13.9
14.0
10.0
Cash Flow from Operating Activities
9.9
9.1
8.0
6.0
4.0
2.0
2009
2010
2011
2012
2013
2014
Definition: Note: Free Cash Flow (FCF) defined as Cash Flow from Operating Activities adding back Net Interest, less Net Capex.
FCF represents cash available for distribution to equity holders of AB InBev before debt service and debt pay down, and before adjusting for Ambev minorities.
Cash Flow from Operating Activities is defined in Figure 17 of the FY14 press release.
© AB InBev 2015 – All rights reserved
28
Capital Allocation objectives
• Investment in organic growth of the business
• Selective M&A, strict financial discipline
• Dividend yield comparable with other consumer goods
companies (3% - 4%)
• Optimal capital structure of approximately 2x
Net Debt/EBITDA
• At a level of around 2x, the return of cash to
shareholders is expected to be comprised of both
dividends and share buybacks
© AB InBev 2015 – All rights reserved
29
Growing dividends over time
+46% in EUR
+26% in USD (1)
Dividend per share (EUR)
3.00
2.05
2.00
1.70
1.20
Final
1.45
0.80
0.28
0.38
1.00
0.60
2008
2009
2010
2011
2012
2013
Interim
(Paid)
2014
Payout ratio (%)
65.0%
58.0%
49.3%
33.8%
26.3%
38.5%
21.3%
2008
2009
2010
2011
2012
2013
1) For purposes of calculating the dividend growth rate in USD, we have taken the EUR/USD rate at the date of payment, with the exception of
the proposed Final FY14 dividend, for which – for illustrative purposes – we used the EUR/USD rate as of 25 February 2015.
© AB InBev 2015 – All rights reserved
2014
30
Share Buyback Program
• The Board has approved a share buyback program for an
amount of $1 billion US dollars, which will be conducted
during the course of this year
• Our current intention is to use the shares acquired to fulfil
our various share delivery commitments under the stock
ownership plan
• The program will be executed under the powers granted at
the General Meeting of Shareholders on 30 April 2014
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31
Q&A
Q&A
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32
FY14 Results
Supplementary
Information
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33
Canada – FY14 summary
• Beer volumes were down 0.7% in FY14,
but +0.4% in 4Q14, on the back of a
good industry performance in the
quarter
• We estimate that we grew market share
in FY14
• Focus brands continue to lead the way,
with estimated market share growth
achieved by Budweiser, Bud Light,
Corona and Stella Artois
© AB InBev 2015 – All rights reserved
Note: Share figures based on internal estimates
34
Latin America South – FY14 summary
• Total volumes -0.2%
Beer volumes flat
• Non-beer -0.6%
•
• Argentina beer volumes -1.7%, in FY14
• Some loss of market share due to
competitive pressure
• EBITDA +17.1% to a margin of 45.6%
% organic growth
FY14
Volumes
-0.2%
Revenue
17.9%
Revenue/hl
18.2%
EBITDA
17.1%
EBITDA margin growth
© AB InBev 2015 – All rights reserved
-30 bps
Note: Share figures based on internal estimates
35
Europe – FY14 summary
• Own beer volumes -6.1%
(+0.3% excluding Russia & Ukraine)
• Belgium flat
• Germany -3.4%
• UK own products +1.5%
• EBITDA +1.5% with margin expansion
of 39 bps
© AB InBev 2015 – All rights reserved
% organic growth
FY14
Own beer volumes
-6.1%
Revenue
0.1%
Revenue/hl on a constant
geographic basis
4.3%
EBITDA
1.5%
EBITDA margin growth
39 bps
36
South Korea – 4Q14 summary
• Total volumes down -6.4% in 4Q14
• Weak industry, and some estimated
share loss
• New campaigns implemented for
Cass and OB
• Additional focus on premium brands
to drive trial
© AB InBev 2015 – All rights reserved
Note: Share figures based on internal estimates
37
Net Finance Costs – 4Q14 detail
4Q14 press release – Figure 9
4Q13
4Q14
Drivers
Net interest expense
-389
-374
FY14 coupon guidance at lower end of 4.0 - 4.5%
-40
-29
Guidance of approx. 35m USD per quarter
-124
-127
Guidance of approx. 80m USD per quarter.
• 275mm USD mark-to-market gains on 33.7m
shares
• Positive FX impact
• Bank fees and taxes
Net interest on net defined benefit liabilities
Accretion expense
Other financial results
-116
316
Net finance costs
-669
-214
4Q14 press release – Figure 10
4Q13
4Q14
Share price at the start of the quarter (Euro)
73.58
88.12
Share price at the end of the quarter (Euro)
77.26
93.86
28.3
33.7
Number of equity instruments (millions)
Other Financial Results
MtM Gain (€93.86 - €88.12) * 33.7m shares
Carrying cost / FX
Net Dividend (€1.00 per share, less 25% WHT)
Total Gain
Converted to USD @ $1.214
© AB InBev 2015 – All rights reserved
Net Finance Costs (excluding
non-recurring net finance costs)
were 214 million USD in 4Q14
compared with 669 million USD in
4Q13
in million EUR
193
7
25
225
275 m USD
38